In
re Ginzl, (Bkrtcy.M.D.Fla.)
July 6, 2010: Discharge -
Obligations imposed by marital settlement agreement were
nondischargeable. Obligations which a Chapter 7 debtor
incurred prepetition in connection with his divorce,
pursuant to the terms of a marital settlement agreement
signed by the parties and incorporated into a final judgment
of divorce, consisting of the debtor's obligation to his
ex-wife for permanent periodic alimony, for a lump sum
payment from anticipated proceeds of the sale of marital
property, for the assumption and payment of mortgages and
homeowners' association dues, for the payment of a
deficiency on a joint income tax return, and for payment of
reasonable attorney fees that the ex-wife incurred in
enforcing his obligations under the marital settlement
agreement, were nondischargeable, as domestic support
obligations or obligation incurred in connection with his
divorce that were not support. The Bankruptcy Abuse
Prevention and Consumer Protection Act (BAPCPA) eliminated
the distinction between domestic support obligations and
other obligations arising from divorce.
Child
support, alimony, property settlement: Sections 523(a)(15)
and 1328(a) or (b): What is and is not dischargeable?
There are two issues involved. The first is whether the
divorce decree provision can be considered
"in the
nature of"
alimony or child support. That includes actually-specified
alimony and child support along with anything that operates
as a substitute for or supplement to alimony or child
support. If the obligation fits that category, it would be
considered non-dischargeable. Conversely, if the provision
operates as a division of property or debt, it is generally
not considered alimony/support, and it could be
dischargeable under the right circumstances. There are
situations where a division of debt is so one-sided that
the party that benefits could be considered to receive
alimony/support, e.g. where a custodial parent is not
working. In that case, the relief from paying debts allows
that party to free up resources to support the
children, i.e., operating in the nature of alimony/child
support. First, look at the decree. If it addresses
dividing debts and assets in a completely separate section
from the provision on the award of alimony/support, it is
more likely, though not necessarily certain, to be
considered division of debt or property which is potentially
dischargeable. It's really a case-by-case situation.
The second issue is what type of bankruptcy is filed? If it
is a Chapter 7, then even a division of property or
debt obligation to hold the ex- harmless would not be
discharged because of Section 523(a)(15). If the debtor
files Chapter 13 and gets a general discharge under 1328(a),
then an obligation to divide property or debt (that is not
"in the nature of" alimony/support) would be dischargeable
because 523(a)(15) doesn't apply to a 1328(a) general
discharge. However, it does still apply to a 1328(b)
hardship discharge. Thanks to Darrell Ihns
Case
studies on DSO:
http://books.google.com/books?id=EI4DihDjynQC&pg=RA1-PA16&lpg=RA1-PA16&dq=chapter+13+debts+in+the+nature+of+alimony+support&source=bl&ots=UCmnjWUlG8&sig=jmMa4DA5esW8qQvND8H6LXV5ijo&hl=en&ei=wJJlTJr4CoP2swPNu5WFDQ&sa=X&oi=book_result&ct=result&resnum=10&ved=0CD4Q6AEwCQ#v=onepage&q=chapter%2013%20debts%20in%20the%20nature%20of%20alimony%20support&f=false
In re Pardee, (Bkrtcy.N.D.Okla.)
July
22, 2010: Bankruptcy Estate - Funds that were subject to
constructive trust could not be claimed as exempt by debtor
with respect to trust beneficiary. Funds which were
being held in a Chapter 7 debtor's individual retirement
account (IRA), but which were subject to a constructive
trust imposed by a state-court order in favor of the former
wife of the debtor's deceased husband, were not bankruptcy
estate property. Thus, the funds could not be claimed as
exempt by the debtor with respect to the former wife's
interest in the fund.
25-214. Management and control
A. Each spouse has the sole
management, control and disposition rights of each spouse's
separate property.
B. The spouses have equal management, control and
disposition rights over their community property and have
equal power to bind the community.
C. Either spouse separately may acquire, manage, control or
dispose of community property or bind the community, except
that joinder of both spouses is required in any of the
following cases:
1. Any transaction for the acquisition, disposition or
encumbrance of an interest in real property other than an
unpatented mining claim or a lease of less than one year.
2. Any transaction of guaranty, indemnity or suretyship.
3. To bind the community, irrespective of any person's
intent with respect to that binder, after service of a
petition for dissolution of marriage, legal separation or
annulment if the petition results in a decree of dissolution
of marriage, legal separation or annulment.
25-215.
Liability of community
property and separate property for community and separate
debts
A. The separate property of a
spouse shall not be liable for the separate debts or
obligations of the other spouse, absent agreement of the
property owner to the contrary.
B. The community property is liable for the premarital
separate debts or other liabilities of a spouse, incurred
after September 1, 1973 but only to the extent of the value
of that spouse's contribution to the community property
which would have been such spouse's separate property if
single.
C. The community property is liable for a spouse's debts
incurred outside of this state during the marriage which
would have been community debts if incurred in this state.
D. Except as prohibited in section 25-214, either spouse may
contract debts and otherwise act for the benefit of the
community. In an action on such a debt or obligation the
spouses shall be sued jointly and the debt or obligation
shall be satisfied: first, from the community property, and
second, from the separate property of the spouse contracting
the debt or obligation.
Filing bankruptcy for
one spouse and not the other: Discharge of the marital
community and discharge of the non-filing spouse assuming
that they are both married at the time of incurring of the
debt and the filing the petition.
Example one: A Debtor incurs
debt as a separate and community obligation. If Debtor
files bankruptcy and the non-debtor is not included, the
Discharge will discharge the obligation for the Debtor and
the marital community; because the non-debtor did not incur
the debt, there is no obligation for non-debtor and his
separate property.
Example two: If the Non-Debtor
incurs the debt, the community is obliged as is the
Non-Debtor. Debtor files a Bankruptcy, the 524 Community
Discharge discharges the community obligation. Non-Debtor's
separate obligation is not discharged. However, the
Creditor can pursue only the non-debtor's separate
property. The non-debtor's contribution to the community is
not subject to collection because that portion is only
subject to collection if the debt is from prior to the
marriage under ARS 25-215 (B). In general, see ARS 25-215.
Warning: If
the event that the divorce happens, the debts are no longer
community debts but joint debts and the 524 Community
Discharge is inapplicable. See Frazier v. Goldberg (Ariz.
Ct App)
Subsection (a) of 11 U.S.C. §524
addresses the split discharge, when only one spouse attains
a discharge in bankruptcy, in community property states.
The legislative history of this section says that "if
community property was in the [bankruptcy] estate and
community claims were discharged, the discharge is effective
against the community creditors of the non-debtor spouse as
well as of the debtor spouse. House Report No. 95-595, 95th
Cong., 1st Sess. 365-6 (1977), Senate Report No. 95-989,
95th Cong., 2d Sess. 80 (1978). § 524(a)(3) treats the
effect on the non-debtor spouse of a discharge of a
debtor in a community property state when the non-debtor
spouse is liable on the community claim, but has not filed a
bankruptcy petition. That is, if one spouse in a community
property state has commenced a bankruptcy case where, as
here, no claim is excepted from the debtor's discharge and
is not otherwise found to be nondischargeable, and if the
non-debtor spouse would not have had a claim excepted from
her discharge in a hypothetical case commenced on the same
day as the commencement of the debtor's case, then the
creditors of either spouse holding community claims on the
date of bankruptcy are thereafter barred from asserting
claims against after acquired community property. It was the
duty of the scheduled creditors in the Braden Jay Karber
bankruptcy proceedings to object to the hypothetical
discharge of Valerie Karber, as the non-debtor spouse,
within the same time limits as their objections to the
discharge of Braden Jay Karber. 11 U.S.C. § 524(b). No such
objections were filed and thus all community creditors
before the Court in that case are now barred from seeking to
collect their deficiencies from the after acquired community
property of either Braden Jay Karber or Valerie Karber.
In re Karber 25 B.R. 9, 12 (Bkrtcy.Tex.,1982); See also
In re Dyson 277 B.R. 84 (Bkrtcy.M.D.La.,2002) - note
not 9th Circuit decisions.
Birt vs Birt,
1 CA-CV 03-0258 (Az Ct App Div
1, 8/12/04)
Appellant Judith M. Birt (“Wife”) appeals from the trial
court’s denial of her motion to set aside the decree of
dissolution of her marriage to Appellee John Mark Birt
(“Husband”). We hold that when a party to a dissolution
action files a petition in bankruptcy shortly after entry of
the decree to avoid the decree’s effect on allocation of
community debts and such discharge may significantly affect
the non-discharged spouse’s qualification for spousal
maintenance, child support and the equitable division of
community property, the trial court should vacate those
portions of the decree pursuant to Arizona Rule of Civil
Procedure 60(c)(6)(“Rule 60(c)(6)”) so it can provide relief
to the non-discharged spouse. Based on the record presented
here, the superior court erred when it denied Wife’s motion.
We reverse that order and remand for further proceedings
consistent with this decision.
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